Telecom Argentina SA Q2 FY2023 earnings call

Management Statement and Operational Highlights

• EBITDA Margin: EBITDA margin during the first half of 2023 was 28.4%.
• CapEx: CapEx was approximately $655 million (16% of revenues) in the last 12 months, with successful execution despite import restrictions, focusing on FTTH network expansion.
• Cash Flow: Generated ~$308 million in free cash flow before dividends and interest payments in H1 2023, an improvement of ~$52 million YOY.
• Pricing: Began monthly price increases in March 2023 to improve pass-through of inflation, resulting in service revenue variation flat in real terms despite rising inflation.
• Subscribers: Mobile subscriber base grew almost 3% YOY; broadband FTTH accesses grew 72% YOY; Personal Pay onboarded ~1.2 million clients by H1 2023.
• 5G: 5G inception underway with 220 5G sites, mostly using DSS technology.
• Debt: Successfully canceled all financial debt commitments, clearing maturity profile for remainder of the year.

Segment Performance

• Mobile: Mobile revenues accounted for 40.5% of total revenues. Mobile subscriber base grew almost 3% year-over-year, with mobile data usage up 15% in average monthly gigabytes per user. Postpaid clients make up 40% of the total mobile client base.
• Broadband: Broadband revenues were 21.4% of total revenues. Broadband accesses decreased by 144,000 (-3.4% YOY) due to a reduction in xDSL accesses, but FTTH accesses grew 72% YOY, and client base for Internet speeds of 100 MB or more increased by 97%.
• Pay TV: Pay TV revenues were 18.3% of total revenues. Despite a 4.6% decrease in Paid TV subscribers (-160,000), Flow's unique customers reached 1.3 million, up 7% YOY. In Paraguay, Pay TV clients totaled 100,000, growing 11% YOY.
• Fixed Telephony and Data: Fixed telephony and data revenues were 11.6% of total revenues. Fixed voice subscribers (IP telephony lines) totaled 2.9 million in H1 2023, with a reduction in traditional fixed copper network accesses.
• Equipment Sales: Equipment sales revenues were 7.4% of total revenues.
• Paraguay Operations: Nucleo generated $102 million in revenues and $49 million in EBITDA in H1 2023, with an EBITDA margin close to 50%. Mobile customers totaled 2.3 million, fixed Internet services subscribers over 250,000 (+14% YOY), and fixed network deployment in Paraguay reached 696,000 homes passed (+10% YOY).
• Fintech (Personal Pay): Personal Pay had almost 1.2 million onboarded clients by H1 2023, with total payment number reaching almost 2.2 million in June 2023 (+8x YOY) and total payment volume up 92% vs March 2022.

Guidance

• Continues to increase prices monthly to better pass through inflation.
• Focus remains on expanding FTTH network to consolidate fixed market position.
• Anticipates margin recovery with macroeconomic normalization and return of inflation to milder levels in Argentina.

Risks

• Uncertainties from ongoing industry and economic regulations.
• Possible changes in demand for Telecom's products and services.
• Effects of general market and/or economic conditions and legislation.
• Tighter import restrictions in Argentina affecting CapEx execution.